The race towards 2020 elections already started; Fernández pulled ahead

DOMINICAN REPUBLIC - Report 30 Aug 2018 by Pavel Isa Contreras and Fabricio Gomez

Although others had formally launched their pre-campaign activities aimed at getting the PLD nomination for the presidency, the rally staged by former President Leonel Fernández to inaugurate his pre-campaign was the one that marked the beginning of the race to the 2020 presidential election. He is by far the favorite to win the nomination if Danilo Medina cannot remove constitutional obstacles preventing himself from running once again. Currently, the prospects to enable Medina to run for a third term are not good.

Former President Hipólito Mejía is preparing to formally launch his pre-campaign in the PRM. However, his possibilities seem low. Former presidential candidate Luis Abinader is in control of most of the party structures and surpasses Mejía, by far, in preference. The rest of the parties appear to be far behind in the race, and most likely some of them will join one of the two large parties in order to avoid being crushed in the electoral contest.

The Mark Penn Survey for August 2018 reveals persistent pessimism despite the good macroeconomic performance. Insecurity and crime continue to be the main concerns of the adult population. The preference for the PLD has also declined significantly. It fell from 41% in April 2016 to 29% in October 2017 and further, to 23% in August 2018. However, no political party has been able to take advantage of this strong setback, and the PLD continues to lead the preferences. Moreover, all politicians have seen their image decline within the electorate. Danilo Medina’s approval rating has deteriorated noticeably. In August 2016, 82% said they were satisfied with his work, and only 16% said they were dissatisfied. In October 2017 the percentage of those who were satisfied fell to 69%, and in August 2018 it was 59%, while the percentage of dissatisfied rose to 41%. Nonetheless, as mentioned earlier, these numbers are still very good for Medina.

Luis Abinader appears as the favorite to be the candidate for the PRM among those who prefer the PRM. In the PLD the preference seems more even between Fernández, Medina and Cedeño. The survey also shows that if Leonel Fernández were the candidate for the PLD, and Luís Abinader for the PRM, at this moment the competition would be very close.

As we informed in a recent brief, Congress finally passed the law on political parties. Somehow, and against our predictions, the legislation goes in the right direction and exceeds initial expectations. It mandates that parties keep registries of their members and periodically renew their leadership through internal elections. The law also puts a cap on internal campaign expenses and financing, regulates internal campaign activities, lets parties decide the method for selecting their candidates for national and local elections, sets rules for gender equity and the participation of youth, and mandates the electoral board to oversee financing. This piece must be complemented by a law on elections that sets the rules for financing and campaign activities in the context of national elections, organization of electoral processes and other relevant issues. Despite the above, it remains to be seen whether the law can be applied to its full extent, and whether the electoral board will have the capacity and the will to enforce it. Finally, there are no clear winners or losers. All parties involved either got something or gave it up.

In July inflation declined by 0.02%. As a result, accumulated inflation since January remained almost unchanged compared to June (1.41%), and year-over-year inflation reached 4.43%, remaining within the target range set by the Monetary Program (3.0%-5.0%). This performance meant a reduction in the pace of inflation recently observed, which had encouraged a tougher monetary policy. The main monetary aggregates experienced contractions and maintained the same trend since January. Also, recall that in July the policy rate was adjusted upward by 25 basis points. Both these developments contributed to a sharp rise in the average lending interest rate.

Due to the issuance of USD 1.3 bn in sovereign bonds in July, the Central Bank's international net reserves reached USD 7.39 bn. Reserves had been affected by periodic interventions in the foreign exchange market to maintain the stability of the exchange rate amid pressures produced by the increase in the oil bill.

Finally, we want to call your attention to a recent report by an investment bank indicating that the public debt situation of the Dominican Republic is sustainable without severe fiscal austerity. We agree with that general evaluation, but we draw attention to the fact that, due to the political situation and the electoral cycle, a fiscal adjustment is not foreseeable until August 2020, when a new government takes office. Therefore, the relevant question here is whether such claim will be valid then.

Now read on...

Register to sample a report

Register